Motorola Stock Put Through Ringer After Rating Lowered

Remember those lofty price targets for Motorola stock? Never mind.

Shares of the No. 2 wireless phone maker helped spark Wednesday’s tech sell-off after an analyst lowered his rating on the stock and slashed his 12-month price target, warning that the company is unlikely to beat earnings expectations in 2000.

Motorola lost $17.75 to close at $86.75, its lowest since September and a 53% discount from its record high.

Motorola’s earnings momentum was the talk of Wall Street in January and February. Wall Street was in love with the stock, and analysts repeatedly raised their price targets for the shares.

But on Wednesday, one of those optimistic analysts--Salomon Smith Barney’s Alex Cena--lowered his rating on the stock to “outperform” from “buy” and slashed his price target from $200 to $120.

In a research note, Cena said his long-term outlook on Motorola remained positive, but he said difficulties in the mobile phone business and the confirmation of the loss of a major customer to Nortel Networks “suggests better than expected results are unlikely in 2000.”

A spokesman for Schaumburg, Ill.-based Motorola said the customer, BT Cellnet, had made no announcement on the phone contract in question. A spokesman for Nortel declined to comment.

In part, Motorola’s problem is too much demand: Parts shortages for new phones are expected to limit production.

Yet the company is still expected to post 33% earnings growth in 2001 versus 2000, according to Zacks Investment Research.

Ed Snyder, analyst with Chase Hambrecht & Quist, downplayed Salomon’s move, saying the brokerage was simply reining in expectations that had gotten ahead of some other analysts’.

“We spent four hours with Motorola yesterday, and the company is still bullish on their growth,” Snyder said. “This is an opportunity for Salomon to bring their numbers more in line with the Street.”